BILL NUMBER: SB 928	CHAPTERED  10/10/99

	CHAPTER   862
	FILED WITH SECRETARY OF STATE   OCTOBER 10, 1999
	APPROVED BY GOVERNOR   OCTOBER 8, 1999
	PASSED THE SENATE   SEPTEMBER 9, 1999
	PASSED THE ASSEMBLY   SEPTEMBER 3, 1999
	AMENDED IN ASSEMBLY   SEPTEMBER 2, 1999
	AMENDED IN ASSEMBLY   AUGUST 19, 1999
	AMENDED IN ASSEMBLY   JULY 14, 1999
	AMENDED IN SENATE   JUNE 1, 1999
	AMENDED IN SENATE   MAY 11, 1999
	AMENDED IN SENATE   APRIL 27, 1999
	AMENDED IN SENATE   APRIL 13, 1999

INTRODUCED BY   Senator Burton

                        FEBRUARY 25, 1999

   An act to repeal the heading of Chapter 4 (immediately following
Section 14536) of Part 5.3 of Division 3 of, to repeal the heading of
Article 1 (immediately following Section 14536) of Chapter 4 of Part
5.3 of Division 3 of, and to add Chapter 4 (commencing with Section
14550) to Part 5.3 of Division 3 of, the Government Code, relating to
transportation, and making an appropriation therefor.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 928, Burton.  Transportation:  financing.
   Existing law requires that all money in the State Highway Account
in the State Transportation Fund derived from federal sources or from
appropriations to other state agencies, or deposited in the account
by local agencies or by others, be continuously appropriated to, and
be available for expenditure by, the Department of Transportation for
the purposes for which the money was made available.  Unless
otherwise expressly provided for by law, none of the balance of the
money in the account may be expended until it has been specifically
appropriated by the Legislature.
   This bill would continuously appropriate the amounts specified in
the Budget Act as having been deposited in the account from federal
transportation funds and pledged by the California Transportation
Commission, as specified below, to the Treasurer for the purposes of
issuing federal highway grant anticipation notes, as specified, to
fund transportation projects selected by the commission.  The bill
thereby would make an appropriation.
   The bill would require the commission, in order to provide
security for the repayment of the notes, to adopt a resolution
dedicating and pledging any future receipts of federal transportation
funds to the payment of the notes.  Upon taking that action, the
commission would be authorized to request the Treasurer to issue the
notes.
   The bill would require the Treasurer to issue the notes pursuant
to the commission's resolution and would require the proceeds from
the sale of the notes to be deposited in the Transportation Financing
Subaccount, which the bill would create in the account.  The funds
in the subaccount would be available for use as directed by the
commission and administered by the Department of Transportation and
to pay costs associated with the issuance of the notes.
   The bill would provide that the notes may not be deemed to
constitute a debt or liability of the state or any political
subdivision thereof, or a pledge of the full faith and credit of the
state or any political subdivision thereof, but shall be paid solely
from the funds and revenues pledged for that purpose.
   The bill would limit the eligible projects to transportation
projects that have been designated for accelerated construction by
the commission.
   Appropriation:  yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  The heading of Chapter 4 (immediately following Section
14536) of Part 5.3 of Division 3 of the Government Code is repealed.

  SEC. 2.  The heading of Article 1 (immediately following Section
14536) of Chapter 4 of Part 5.3 of Division 3 of the Government Code
is repealed.
  SEC. 3.  Chapter 4 (commencing with Section 14550) is added to Part
5.3 of Division 3 of the Government Code, to read:

      CHAPTER 4.  FEDERAL HIGHWAY GRANT ANTICIPATION NOTES
      Article 1.  Legislative Findings and Declarations

   14550.  The Legislature hereby finds and declares all of the
following:
   (a) Between 1970 and 1990, California's population grew by 50
percent, while the total number of miles driven in the state
increased by 100 percent.
   (b) Conservative estimates have the state adding an additional 6
million new residents by the end of the next decade.
   (c) Revenues available for investment in California's
transportation system have not kept pace with that increasing state
population, or with the increased demand on the state's
transportation infrastructure.
   (d) California is now home to five of the nation's 10 most
congested urban areas.
   (e) Between 1987 and 1995, the number of California drivers who
sit idle in traffic congestion has grown by 70 percent, and
California drivers now sit idle in traffic congestion more than
300,000 hours per day.
   (f) It is estimated that traffic congestion in California now
costs the state's businesses more than two million eight hundred
thousand dollars ($2,800,000) per day in lost time and resources.
   (g) The United States Congress recently authorized states under
the federal National Highway System Designation Act of 1995 and the
federal Transportation Equity Act for the 21st Century to issue
"GARVEE bonds," which are tax-exempt anticipation notes backed by
annual federal appropriations for federal aid transportation
projects.
   (h) Utilizing grant anticipation notes to finance federal
transportation projects can greatly accelerate projects and can
result in significant cost savings to the state, since those
transportation projects can be completed at present-day costs.
   (i) Funding transportation projects with grant anticipation notes
can also deliver projects to the public significantly sooner than
traditional funding mechanisms.
   (j) Therefore, it is in the best interest of the State of
California to develop these new and innovative methods for funding
and accelerating critical transportation infrastructure projects.

      Article 2.  Definitions

   14552.  Unless the context otherwise requires, the definitions in
this article govern the construction of this chapter.
   14552.2.  "Eligible Project" means any highway or  other
transportation project that has been designated for accelerated
construction by the commission.
   14552.4.  "Federal transportation funds" means any funds
apportioned to the state by the United States  Department of
Transportation, including, but not limited to, funds paid pursuant to
the Transportation Equity Act for the 21st Century (Public Law
105-178).
   14552.6.  A "note" is a federal highway grant anticipation note
issued by the Treasurer under this chapter.

      Article 3.  Selection of Projects

   14553.  (a) The commission may from time to time  select and
designate eligible projects to be funded from the proceeds of notes,
if financing of the project from the proceeds of notes has been
approved by the Federal Highway Administration and the regional
transportation planning agency, and the project has completed
environmental clearance and project design.
   (b) Notwithstanding Section 7550.5 of the Government Code, on or
before April 1 of each year, the commission, in conjunction with the
Treasurer's office, shall prepare an annual analysis of the bonding
capacity of federal transportation funds deposited in the State
Highway Account in the State Transportation Fund.
   14553.2.  The commission, in cooperation with the department and
regional transportation planning agencies, shall establish guidelines
for eligibility for funding allocations under this chapter.  The
guidelines shall be nondiscriminatory and shall be designed to allow
as many counties as possible to establish eligibility for funding
allocations under this chapter, regardless of the population or
geographic location of the county.
   14553.4.  The Treasurer may not authorize the issuance of notes if
the annual repayment obligations of all outstanding notes in any
fiscal year would exceed 30 percent of the total amount of federal
transportation funds deposited in the State Highway Account in the
State Transportation Fund for any consecutive 12-month period within
the preceding 24 months.
   14553.6.  All funds allocated to a project under this chapter,
including cost overruns and financing costs, shall be counted against
the state transportation improvement program county share for the
county in which the project is located.
   14553.7.  In order to provide security for repayment of the notes,
the commission shall adopt a resolution dedicating and pledging any
future receipts of federal transportation funds received by the state
to the payment of principal of, and interest and premium on the
notes, for as long as any notes remain outstanding.  That action
shall constitute a pledge or receipt of those moneys as collateral
within the meaning of subdivision (b) of Section 5450.  The pledge
shall be governed under Chapter 5.5 (commencing with Section 5450) of
Division 6 of Title 1 of the Government Code.  The commission shall
be deemed a "public body" for purposes of Section 5451, as defined in
Section 5450.
   14553.8.  Before notes are issued under this chapter, the
commission, in cooperation with the department, shall consider and
determine the appropriateness of the mechanism authorized by this
chapter in comparison to other funding mechanisms, including, but not
limited to, pay-as-you-go, federal advance construction, federal
incremental advance construction, or other funding methods authorized
under federal law to achieve maximum efficiency from the state's
federal allocation of transportation funds.
   14553.9.  (a) Upon taking the actions authorized under this
article, the commission may request the Treasurer to issue notes to
provide funds for the eligible projects.
   (b) Notwithstanding Section 7550.5 of the Government Code, on or
before April 1 of each year, the commission shall prepare and submit
an annual report regarding the preceding calendar year to the
Governor and the Legislature.  Each report shall compile and detail
the total amount of outstanding debt issued pursuant to this chapter
and the projects funded by that outstanding debt.

      Article 4.  Issuance of Notes

   14554.  (a) In order to provide for the financing of selected
projects, the Treasurer may issue tax-exempt or taxable notes under
this article.  Proceeds of the sale of those notes shall be deposited
in the Transportation Financing Subaccount, which is hereby created
as a special trust fund in the State Highway Account in the State
Transportation Fund.  The funds in the subaccount shall be available
for use as directed by the commission and administered by the
department and to pay costs associated with the issuance or further
security of the notes or for capitalized interest of up to 12 months.

   (b) Any issue of notes may be secured and made more attractive to
capital markets through financial instruments, including, but not
limited to, the following:
   (1) Credit enhancements, including, but not limited  to, letters
of credit, bond insurance, and surety bonds provided by private
sector financial institutions.
   (2) Insurance and guarantees provided by any other agency of the
state.
   14554.2.  The Treasurer shall issue notes from time to time
pursuant to a resolution from the commission.  Those pledges shall be
governed under Chapter 5.5 (commencing with Section 5450) of
Division 6 of Title 1 of the Government Code.  The resolution may
contain any of the following provisions, which shall be a part of the
contract with the holders of the notes to be authorized:
   (a) Provisions pledging receipt of future federal transportation
funds to secure the payment of the notes or of any particular issue
of notes, subject to those agreements with noteholders as may then
exist, and pledging moneys held in funds and accounts pursuant to the
note issue, or the earnings thereon.  The Treasurer may authorize
classes of notes having different priority in the receipt of
available federal transportation funds.
   (b) Provisions for the investment of proceeds of the notes or of
the moneys received by the Treasurer for repayment of the notes.
   (c) Provisions setting aside reserves or sinking funds, and the
regulation and disposition thereof.
   (d) Limitations on the issuance of additional notes, the terms
upon which additional notes may be issued and secured, and the
refunding of outstanding notes.
   (e) The procedure, if any, by which the terms of any contract with
noteholders may be amended or abrogated, the amount of notes and the
holders thereof that are required to give consent thereto, and the
manner in which the consent may be given.
   (f) Definitions of acts or omissions to act that constitute a
default in the duties of the state to holders of the notes, and
provisions on the rights and remedies of the holders in the event of
a default.
   14554.4.  Any notes issued under this chapter may be secured by a
trust agreement, indenture, or resolution by and between the
commission and a trustee.  The trustee may be the Treasurer or a bank
or trust company chartered under the laws of this state or of the
United States and designated by the Treasurer.  The Treasurer may act
under the note resolution as the fiscal agent for the notes.
   14554.6.  The notes shall be authorized by resolution or
resolutions of the Treasurer, shall be in the form, shall bear the
date or dates, and shall mature at the time or times, as the
resolution or resolutions may provide, except that no note may mature
more than 30 years from the date of its issue.  The fixed or
variable notes shall bear interest at the rate or rates, be in the
denominations, be in the form, be executed in the manner, be payable
in the medium of payment at the place or places within or without the
state, be subject to the terms of redemption and contain the terms
and conditions, that the resolution or resolutions may provide.  The
notes shall be sold at public or private sale by the Treasurer at,
above, or below the par value, on the terms and conditions and for
the consideration that the Treasurer shall determine.
   14554.8.  (a) Notwithstanding Section 13340 of the Government
Code, the amounts specified in the annual Budget Act as having been
deposited in the State Highway Account in the State Transportation
Fund from federal transportation funds, and pledged by the commission
under this chapter, are hereby continuously appropriated, without
regard to fiscal years, to the Treasurer for the purposes of, and in
accordance with, this chapter.
   (b) Funds that are subject to Section 1 or 2 of Article XIX of the
California Constitution may be used as the state or local principal
match for any project that is eligible for federal matching funds and
is funded pursuant to this chapter.
   14555.  Upon request of the commission, the Treasurer may issue
refunding notes to refund any outstanding notes, and to pay costs
associated with that refunding.
   14555.2.  Whenever the Treasurer deems that it will increase the
salability or the price of the notes to obtain, prior to or after
sale, a legal opinion, other than that of the Attorney General, as to
the validity or tax-exempt nature of the notes, the Treasurer may
obtain that legal opinion.  Payment for those legal services shall be
made from the proceeds of the sale of the notes.
   14555.4.  The Treasurer may employ financial, engineering, or
transportation consultants or advisers, underwriters, and accountants
as may be necessary in his or her judgment in connection with the
issuance and sale of any notes of the Treasurer.  Payment for these
services may be made out of the proceeds of the sale of the notes.
   14555.6.  Section 10295 of the Public Contract Code and Article 4
(commencing with Section 10335) of, and Article 5 (commencing with
Section 10355) of, Chapter 2 of Part 2 of Division 2 of the Public
Contract Code do not apply to agreements entered into by the
Treasurer pursuant to the sale of notes authorized under this
chapter.
   14555.8.  Notes issued under this chapter are a legal investment
for any state special or trust fund notwithstanding any provision of
law limiting the investments that may be made by the special or trust
fund.  The notes shall be legal investments in which all public
officers and public bodies of the state, its political subdivisions,
all municipalities and municipal subdivisions, all insurance
companies and associations and other persons carrying on an insurance
business, all banks, savings and loan associations, savings banks
and savings associations, investment companies, all administrators,
guardians, executors, trustees and other fiduciaries, and all other
persons authorized to invest in notes or in other obligations of the
state, may properly and legally invest funds, including capital, in
their control or belonging to them.  The notes may be used as
security for public deposits.  The notes are also securities that may
properly and legally be deposited with and received by all public
officers and bodies of state or any agency or political subdivision
of the state and all municipalities and public corporations for any
purpose for which the deposit of notes or other obligations of the
state is authorized by law, including deposits to secured public
funds.
   14555.9.  Notes issued under the provisions of this chapter may
not be deemed to constitute a debt or liability of the state or of
any political subdivision thereof, or a pledge of the full faith and
credit of the state or of any political subdivision thereof, but
shall be payable solely from the funds and revenues pledged therefor.
  All the notes shall contain on their face a statement to the effect
that the State of California shall not be obligated to pay the
principal, or the interest on the notes, except from the revenues
received by the Treasurer as shall be provided by the documents
governing the revenue note issuance, and that neither the faith and
credit nor the taxing power of the State of California or of any of
its political subdivisions is pledged to the payment of the principal
or interest on the notes.  The issuance of notes under this part
shall not directly or indirectly or contingently obligate the state
or any of its political subdivisions to levy or to pledge any form of
taxation whatever or to make any appropriation for their payment.
